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A
Communications and Brand Building Campaign for promotion of ESDM sector in
India has been launched with the objective to build “Made in India” as leading
global brand in ESDM and increasing awareness regarding initiatives taken by
Government to promote investments

The electronics industry emerged in the 20th century and has quickly become a global industry worth of millions
of dollars with products ranging from simple consumer products to highly
complicated aerospace ones. Over the years electronics has become a meta-resource,
the building blocks of modern technology and is redefining how the world
operates every day. India also has been a part of this great transformation,
where electronics today has become a way of life.

The demand for electronics hardware in the country is projected to
increase from USD 45 billion in 2009 to USD 400 billion by 020 (Source: Task Force Report). This provides
a huge opportunity for India to become an Electronics System Design and
Manufacturing (ESDM) hub to meet the domestic as well as the global
requirements. Most of India’s domestic demand is presently being met through imports.
This has serious economic and strategic implications
for the country. Every country is unique. India’s uniqueness is about diversity
but at the same time, masses havesimilar kind of
expectations from consumer products, more so from consumer durables,
particularly electronic products. Under such a dynamic environment ESDM is set to
be the area of interest for India in the years to come.

Importance of the
ESDM Sector in the Indian Context

Trade Imbalance

During the last few years India has been the centre of a strong
economic growth. With trade barriers lightened and rapid improvements in
infrastructure and technology the Indian consumer had global products at his
finger tips. While India strived ahead in the Hi-Tech service sector, here was
a gap in the Hi-Tech manufacturing, specifically in the electronics area. As a
result of which India had to rely on heavy imports to meet the consumer
demands. If we look at the current figures, India produces just about 45
percent of the demands (Source: Task Force Report) creating an export import gap
of around USD 45 billion. Estimates show that the demand for electronic goods
will grow a CAGR of around 22 percent and
reach a figure of USD 400 billion in year 2020. As of now, the domestic
production growth rate stands at 16 percent and holding on to this growth rate
would give India a total production of USD 104 billion creating a trade
imbalance of USD 296 billion in the year 2020 (Source: Task Force Report). Looking
at these figures we do need to start taking proactive steps to bridge this huge
gap and make sure that ESDM sector contributes to India’s FOREX reserves rather
than depend on it to meet the import obligations.

Employment Generation

The electronics manufacturing sector is one of the very few
sectors that can provide high employment across all education levels. This gives
a positive thrust to the overall socio economic condition in India. According
to the Skill Gap Analysis Report, the electronics industry has the potential to
employ around 3.2 million people by the year 2022 if we are able to hold on to
the current electronics production growth rate of around 16 percent (Source:
Skill Gap Analysis Report). This can reach a figure as high as 28 million if we
are able to provide sufficient impetus to this sector.

Intellectual Property

Over the last decade or so India has become the intellectual powerhouse
in the hi-tech service industry. However India could never lay a right to this
intellectual excellence since most of the organizations where innovations took
place were based out of a foreign soil having operations in India. This has
caused a significant loss in terms of the total value creation to an extent of
90 percent (Source: Task Force Report). In such a scenario, re-usability of the
Intellectual Property created does not always benefit the Indian Industry.
Indian software industry is a fitting example of the loss ofIntellectual Property. While Indian software
companies have done wonders in Information technology field but it could rarely
hold on to the Intellectual Property generated because most of the deliverables
where fully owned by their clients. ESDM sector provides India to take a
corrective and holistic view to address this problem. With a well defined
roadmap and policy level interventions to encourage companies to have the
Intellectual Property to reside in India, we should be able to stake claim on the
entire value created, rather than the approximate 10 percent that we do now.

Sectors of national importance

As we move forward in this decade, major investments are expected in 3 major areas of strategic importance to
India; Defence, Avionics and Nuclear sector. Estimates state that India
is going to be the 3rd largest market for defence
equipment by the year 2015 (the total market size would be around 325 billion,
Source: Task Force Report). With technology becoming the heart of modern warfare
and overall security apparatus, ESDM becomes the indispensable area of focus.
We are seeing a visible thrust on indigenous defence equipment development to reduce
our reliance on imports as well as remove the bottlenecks of foreign technology
transfers.

In the recent years we have seen a surge of demand for aircrafts in
India, China and Russia. It is expected the combined demand these three
countries would account for 15 percent of the total demand of this industry.
(Source: Task force Report). Visibly avionics, a highly electronics dependent
sector, would be the next vital area here ESDM sector of India can play a
defining role. Creating a strong base of OEM’s or of parts and subsystem manufacturers
to supply Tier I OEMS’s would help in creating a niche for India in the avionics
field. The effects of this could be far reaching, starting from creating a
strong Intellectual property base to driving healthy exports.

Over the last decade there has been a worldwide consensus to look for
greener alternatives to generate energy and India as a country cannot ignore
such a mandate. This has given a great boost to the Nuclear power (considered
one of the cleanest source of energy) in India. With a formal worldwide recognition
and endorsement, India’s nuclear power is expected to contribute 25 percent to
50 percent of power generated by 2050, a massive leap from the current 3 percent
(Source: Task Force Report). This opens new fronts for the ESDM here, where
they can contribute a sizeable portion of the power plant equipment costs. On one
side this will significantly lower the costs of the nuclear plant setup, reduce
dependency on imports and on the other side will create an invaluable knowledge
repository and expertise for exports in the future.

Government’s
Initiative in meeting the Challanges

The Government attaches high priority to electronics hardware manufacturing
and has taken a number of steps for promotion of this industry. The vision is to establish India as
a leading global destination for electronics system design and manufacturing
(ESDM). The Government is aiming to meet all the domestic demands of electronic
sector and gather surplus for exports by the year 2020. Following are some of
the initiative highlights.

NPE (National Policy on Electronics)

The draft National Policy on Electronics was released by hon’ble Minister
of Communications and Information Technology in October 2011. The Policy has seen finalized after widespread consultations and
it is expected to be approved shortly. Parts of the policies such EMC
(Electronics Manufacturing Clusters) and M-SIPS (Modified Special Incentive
package) has already been approved in principle. The Policy will provide a
clear road map for the development of electronics sector in the country for the
coming decade.

Creating opportunities…

As art of the vision to
make India a leading destination for the ESDM sector, the draft National Policy
on Electronics (NPE) proposes to achieve a domestic production of about USD 400
Billion by 2020 in the ESDM sector by creating an industry friendly policy
framework and ecosystem which provides a level playing field for the domestic
industry. This will involve investment of about USD 100 Billion and provide
employment to around 28 million by 2020. This inter-alia includes achieving a
turnover of USD 55 Billion of chip design and embedded software industry and USD
80 Billion of exports in the sector. Moreover, the policy also proposes setting
up of over 200 Electronic Manufacturing clusters. The draft NPE also proposes
to set up two semiconductor wafer manufacturing facilities and to create and
sustain a vibrant research and development and innovation eco-system in the
ESDM sector. Another important objective of the policy is to significantly
upscale high-end human resource creation to 2500 PhDs annually by 2020 in the
sector. The renaming of the Department, and bringing back of electronics with
IT, is reaffirmation of the thrust that this sector deserves.

Setting up
Semiconductor Wafer Fabs

An Empowered Committee (EC) has been set up for identifying
technology and investors for setting up two Semiconductor Wafer Fabrication
(Fab) Manufacturing facilities after obtaining approval of Cabinet in its
meeting held on 20thApril 2011. The EC after
interacting with the potential investors will crystallize the nature and
quantum of Government support in physical/ financial terms and recommend to the
Government the course of action to attract investments in the sector. The
Expression of Interest (EOI) was sought through advertisement in leading global
and national dailies and websites during June-July, 2011.

Preference to Domestically Manufactured Electronic Goods

Vide Gazette Notification dated 10th February, 2012, the Government
has laid down the policy for providing preference to domestically manufactured electronic
products, in procurement of those electronic products which have security
implications for the country and in Government procurement not with a view to commercial
resale or with a view to use in the production of goods for commercial sale.
The policy is expected to strengthen the cyber security ecosystem in the
country as well as provide a boost to the domestic manufacturing.

Electronics Manufacturing Clusters

The importance of clusters in ESDM is a well accepted phenomenon
worldwide. A well developed cluster can give a unit located in it a cost
advantage of 5 to 8 percent because of various reasons such as increased supply
chain responsiveness, consolidation of suppliers, decreased time-to market, superior
access to talent and lower logistics costs. Setting up of EMCs is an integral
part of this strategy to make India a leading destination for the ESDM sector.

The Union Cabinet in its meeting held on July 4, 2012 approved the
proposal to offer financial support for the development of Electronics Manufacturing
Clusters (EMCs) as these EMCs would aid the growth of the ESDM sector. In
this regard a notification was issued on July 21, 2012 in all leading
newspapers of India and the ESDM department has already started getting
enquiries from the domestic and international players.

The proposed EMCs scheme would support setting up of both Greenfield
and Brownfield EMCs.

The policy covers all States and districts and provides them an opportunity
to attract investments in electronics manufacturing.

Modified Special Incentive Package Scheme

The Union Cabinet on 12th July, 2012 approved the
proposal to provide a special incentive package to promote large-scale manufacturing
in the ESDM sector. The scheme is called the Modified Special Incentive Package
Scheme (M-SIPS). The main features of M-SIPS are as follows:

The scheme provides subsidy for investment in capital expenditure
- 20 percent for investments in SEZs and 25 percent in non-SEZs. It also
provides for reimbursement of CVD/excise for capital equipment for the non-SEZ units.
For high technology and high capital investment units, like fabs, reimbursement
of central taxes and duties is also provided. The incentives are available for investments
made in a project within a period of 10 years from the date of approval.

The incentives are available for 29 categories of electronic products
and product components including semiconductor chips and chip components. The
scheme also provides incentives for relocation of units from abroad.

The scheme is open for three years from notification. Approvals for
incentives not exceeding Rs. 10,000 crores will be granted during the XII Plan
period. The projects with incentives of Rs 10,000 crores have potential to create
employment for nearly 0.5 million persons.

The policy is expected to create an indigenous manufacturing
ecosystem for electronics in the country. It will foster the manufacturing of
indigenously designed and manufactured chips creating a more cyber secure
ecosystem in the country.

Developing Human
Resource

The projected requirement to reach the target of USD 400 billion
is 28 million people. Several initiatives have been taken up to meet this
challenge. Sector skill Council has been set up for Electronics and that for
Telecom sector is in pipeline. The Department will work closely with these Sector
Skill Councils to help them develop necessary competency framework for the
myriad of skills required by this multi-faceted sector.

The Department is also strengthening capacities in NIELIT (formerly
known as DOEACC) and CDAC to train larger number of students in electronics
design and production technology.

The Department is in the process of extending and expanding the Special
Manpower Development Programme for VLSI and chip design. The Phase II of the programme
which covered 32 institutions and generated 5400 BTech/MTech and PhDs in the high
tech segment is ending in March 2013. Phase-III of the programme will encompass
chip to system design and will cover approximately 50 institutions and target
around 10,000 students including 300 PhDs.

Standards

Unlike most countries of the world India lacked a system of standardization
of electronic products. This resulted in the unregulated inflow of sub-standard
and unsafe electronic goods which pose safety hazard. The Department, in
consultation with Bureau of Indian Standards, industry and consumer groups is
working on a standardization regime.

Initiatives in
Pipeline

Apart from the above, Electronic Development Fund (EDF) is another
major initiative. The EDF would provide risk capital for taking up new product development
and generating IPR in the sector. The draft Detailed Project Report (DPR) for
setting up of EDF has been finalized after extensive stakeholder consultations
and process for obtaining requisite approvals is underway.

Communication and
Marketing

Government of India is also making a concerted effort to market
the policies and India as a destination for investment in ESDM. Initial work in
this regard has already commenced.

A meeting of Chief Ministers and Ministers concerned of the States
was organized on August 29, 2011 to highlight the importance of ESDM sector in
India and role which the States can play in this sector by emphasizing the importance
of the role of the State Governments in the promotion of ESDM industry in the
country by developing attractive policies for attracting the investment to their
respective states.

A Communications and Brand Building Campaign for promotion of ESDM
sector in India has been launched with the objective to build “Made in India”
as leading global brand in ESDM and increasing awareness regarding initiatives
taken by Government to promote investments in ESDM sector. As a part of the
Campaign, State level workshops, specific verticals related Workshops and outreach
activities in academia pertaining to ESDM are being promoted. A Communications Need Assessment Study to help
orchestrate the Campaign is also underway.

An e-Newsletter relating to ESDM has also been launched with the
objective of keeping the ESDM stakeholder community better informed about the
policy initiatives, decisions and actions of the Government in the sector.

Strengthening of the
Electronic Governance Structure

There are over 50 major strategies which have been outlined in the
draft National Policy on Electronics. The existing governance structure in the Department
will be strengthened so that the desired focus on the sector can be provided in
an ongoing manner. A Project Management Unit has been created and further strengthening
will be taken up in due course.

Conclusion

The last few months have been very exciting for the ESDM unit of
DeitY. Large milestones have been achieved in terms of the NPE, approval of
EMC’s and MSIPS. The government is following a well thought out road map by which
electronic manufacturing becomes the biggest driver of growth for India. Thrust
would be to drive investments, innovations and create huge employment opportunity,
but not at the cost of environment or Intellectual Property.

In the recent years companies have started looking at a “China
plus one” option to reduce dependency of manufacturing on one country and distribute
the risks across Asia. Vietnam has been one of the favoured nations in such a
case due to its friendly policies. The NPE is one big step to capitalize on the
“China plus one” strategy of companies. India is already recognized as a strong
design hub for electronics but our efforts are to drive India into an ESDM powerhouse.
This is not about low end technology but how innovative ways and high end
technology could be used to produce goods that bring down the price point. Thus
we need to be excited about the opportunity.

By: J. Satyanarayana The author is Secretary,
Department of Electronics & Information Technology, Government of India.